This week, I chatted with Sameer Soleja, the founder and CEO of Molecule, a provider of CTRM and ETRM systems for the commodity sector.
While ERP (Enterprise Resource Planning) systems broadly focus on overall business operations and management, including finance, procurement, and supply chain management, CTRM (Commodity Trading Risk Management) and ETRM (Energy Trading and Risk Management) systems are specifically designed for the commodity trading industry, focusing on trade management, risk management, and market data analysis.
Sameer described ETRM and CTRM as “systems of record for a company trading energy or commodity derivatives and physicals.”
“About a hundred software companies are competing in the ETRM space,” Sameer told me. “And the numbers are still growing. However, two companies, Ion Trading and FIS, probably own eight of the top fifteen vendors. Companies like ours make up the remainder of the top fifteen. There is a long tail of providers who specialize in things from gas accounting to silo management to all sorts of things.
“Consumers have a lot of choices,” Sameer added. “But it’s not a very transparent market. Companies like ours have the incentive to promise the world when you’re jockeying for a chunky contract, of which you might only get a half dozen or less a year. But these chunky contracts typically come with bespoke needs. The software buyer must discern who can provide the services they need.”
I asked Sameer what differentiates his company from others.
“It is the same for any enterprise software provider,” he answered. “We must choose the one or two dimensions in which we will compete and focus our efforts. We concentrate on usability and technology, and our marketing drives that home. You can’t be everything to everyone.
“Even so, focus is our biggest challenge. It should be neither too wide nor too narrow. If it is too wide, we won’t be able to meet a client’s specific needs. If it is too narrow, we would have too little software to sell.”
I told Sameer I had recently heard a story about a new hire at a software company who spent his first morning fixing a bug in the system, sighed, and then resigned. Sameer laughed.
“That’s not what you want happening,” he told me. “You want to create a virtuous cycle between your customers, the use cases you develop your software for, the knowledge your implementation support teams have, and then circle that back up the chain. That way, the customers will be happier, and the software will continuously improve.”
Sameer graduated from the University of Texas at Austin at the end of the dot-com boom and went to work for a company that made custom software for the energy market.
“Over the next eight years,” he told me, “I cycled through some of the places that all the usual suspects cycle through, including Constellation Power in Baltimore where I had my longest stint. I then did my MBA and MPA at the University of Michigan, where I realized that the sector was making terrible software.
“Nobody was ever happy with it. I thought, “Okay, there has to be something better. Let’s bring usability and modern tech into the commodities industry as part of the core platform.”
Sameer founded Molecule in 2012 in Houston and now has a team of around 50 employees, most of whom work remotely in the US, Europe, and South America. The company is opening an office in London for employees in the European area.
“Molecule’s approach has been to sexy up the software and focus on tech and usability,” he told me. “We’ve built our reputation on that. Our brand is sort of outsized in comparison to the size of our company. Our angle is that we understand what our customers do and why.”
The trend in the commodity supply chain is towards outsourcing, whether in operations, compliance or even sustainability. I asked Sameer if risk management and record keeping were going the same way.
“We are a software provider,” he replied. “We don’t install our software on a company’s system; we operate it on our platform. We have two multi-tenant instances, one in Europe and one in the US, and everybody’s on one of those.
“Being in the industry for the last decade, we have got to know other vendors that offer products that a customer might need. We can integrate them into our platform. For example, a customer can benefit from a weather forecasting tool integrated with their compliance system.
“We’re working with a biofuels company that has integrated an environmental auditor. You might not think it would have relevance, but it does when it comes to how you put trades on.”
Molecule recently conducted a survey about sector modernization. I asked Sameer about its conclusions.
“Trading organizations are waking up to the reality that modernization is the key to survival. Interestingly, we found people are not undertaking modernization initiatives to increase their bottom line but to make their businesses more agile. Companies still want their ETRM/CTRM system to be a reliable, fundamental part of their trading organization’s ecosystem, but they want it to support evolving business needs.
“Trading companies want agility and reliability, but they also want better speed and usability and direct access to data. The big ask is to get raw data out of the system. Let’s build a data lake. Let’s extract the data, and we’ll smash it together and do interesting things with machine learning and AI. People want to get their hands on data and do interesting things with it.”
A friend told me that ag tech lags metals and energy. I asked Sameer if it was true.
“Energy is where the money has been,” he replied. “Money brings tech and modernization. The lag is a function of the polarization in the entities involved. You’ve got the ABCD+ group on one side, Farmer Joe on the other, and nothing in between. Ag tech lags unless you’re at one of the ABCD+ companies.
“However, the advent of biofuels at a grand scale offers new opportunities for those in the middle. Producers of crops that become fuels must invest in new technology. If the EPA comes to you and asks you to prove that you earned a credit or certificate, you can’t say, ‘Oh, sorry, my record keeping didn’t work, or you know my compliance system is outdated.’ It could cost you real money.”
“AI is revolutionizing software programming,” I said, “But how is it changing the commodities sector?”
“I believe we are in an experimental stage.
“AI is excellent at summarizing enormous data sets. Agricultural data sets tend to be smaller than electricity data sets, which are huge. Even so, analyzing that amount of data for a community with as limited resources as agricultural can be challenging. The big traders have the resources, but I suspect farms and silos don’t. Their supply chains produce enormous amounts of information. The advent of AI will level the playing field and allow small agricultural players to compete with the ABCD+ group.
“I don’t know whether you are familiar with orange juice, where the big brands use satellites to monitor conditions in the groves. They tell growers when to water, add pesticide, fertilizer, or whatever. They use machine learning. Coca-Cola started doing that ten years ago, but AI may now permit a smaller farmer or firm to do the same.
“AI will re-level the playing field just like the web did 25 years ago,” he concluded. “It is the time to take those bets.”
© Commodity Conversations® 2024
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